Monday, August 18, 2014

Behind the Africa-America Summit

Why Africa needs trade and investment from America, not lectures on democracy and human rights

Last week, we were in Washington DC to attend the America-Africa
Summit. China, the European Union, India – even Turkey – have all held
summits on Africa and with African leaders to discuss how to engage our
continent in trade and investment. Given that America is governed by a
“black” president, and given the hope and expectations many Africa
elites had in Barack Obama, it is interesting he has joined the new
“scramble” for Africa this late in the game. Good that Obama thought of
his “home” even belatedly.

I was struck by exhaustion and spent much of my time on a drip in
hospital than at the summit. However, I was impressed that Obama avoided
bringing in the issue of governance (democracy, human rights blah blah
blah) on the agenda and hence focused on common interests through trade
with investment. I was pleased not because I think governance issues are
not important – I think they are very, very important – but because
they should be left to local players. If Africans want democracy, they
should fight and sacrifice for it and not outsource it to Americans.

Attempts by Western powers to promote democracy in Africa have
created a dependency mentality among our elites. Rather than see
democracy as a system of government that evolves over time through
political struggle and compromise, African elites want it to be a gift
received on the silver platter of Western generosity. Thus, a large
cross section of African elites are always waiting for Western
governments and the global institutions they control to do for them what
they are afraid to do locally i.e. invest in political organisation and
mobilisation to promote improved governance.

Secondly, the American people and their government, however
well-intentioned they may be, cannot dictate democracy on our societies.
Democracy in Africa will not come from the dictates of Paris, London
and Washington but from the struggles and compromises of African peoples
and their governments. However, if America wants to promote democracy
and human rights, it can be most effective if it looks at its role as
being indirect and long term. Here, America can use its resources to
stimulate, instigate, precipitate, catalyse, and cultivate the emergence
of groups, institutions and structures that can promote democratic
development.

Thus, democracy in Africa, to borrow an expression from Adam Smith,
will result largely from the invisible hand of economic prosperity as it
did in Taiwan and South Korea. Of course countries have different
political dynamics – so not every country that grows rich will follow
the footsteps of South Korea and Taiwan. There will be many exceptions
and divergences to this rule. However, America cannot politically or
militarily dictate political outcomes in Africa. But by promoting trade
and investment, it has a high potential to facilitate the growth of a
large and educated middleclass. This will provide the social software
necessary for enlightened and democratic politics.

The second message to emerge from the conference was the importance
of American investment in partnership with local businesspersons.

In the past, I have seen a naïve fascination with Foreign Direct
Investment (FDI) on our continent. Governments in Africa are always
eager to listen and attend to the concerns of foreign investors. This is
good because FDI brings in capital, technical and managerial expertise,
experience in running large and complex organisations and penetrating
external markets. Yet obsession with FDI has led our governments to
ignore local investors who contribute more than 80% of investment
capital and employ the largest number people. Only local investors, and
not FDI, will transform our countries.

This time, there was recognition that Americans seeking investment
opportunities on our continent would do better to work with local
partners. This would give them access of local norms, habits and
consumption attitudes and patterns that are critical for success. In any
case, partnership with local entrepreneurs confers legitimacy on FDI.
But most critically, development is a product of political action. Thus,
you need local capital to promote public policies and political
institutions that can foster transformation. FDI cannot do this.

FDI also lacks networks of trust with local bureaucratic and
political insiders to negotiate deals. (It would be difficult for John
Smith to fly from London and negotiate a bribe with James Mukasa). This
leads FDI to identify locals to act as a link between it and domestic
bureaucratic and political players. These locals (neo-Marxists call them
“compradors”) are commission agents who make a living by negotiating
bribes for local officials on behalf of FDI.

This is a class that has developed and consolidated in Uganda under
President Yoweri Museveni. It has skills for lobbying and bribing state
officials for favours but not in changing public policy to facilitate
the growth of a robust private sector. Thus, rather than organise
collective action to change public policy (an undertaking with political
risks) FDI realises that it does better lobbying for individual
exception to the general problems that afflict business as a whole.

As a result, except for small island nations, our planet does not
have many examples of nations that were transformed by FDI. The most
successful economies such as South Korea and Japan (like France,
Germany, and USA etc. before them) transformed through the development
of what Marxists called the “national bourgeoisie.” This was occasioned
by the development of large locally owned brands that went global –
Toyota, Panasonic, Toshiba, Sonny (in Japan) or Hyundai, Daewoo,
Samsung, LG (in South Korea) etc.

Indeed, many scholars argue that the inability of Latin American
nations to transform as rapidly as their East Asian counterparts was in
part due to the early presence of multinational capital in those
countries. Of course the dominance of multinational capital in a country
may be due to the absence of domestic capital – so it comes to fill a
gap. But it also has the potential to stifle the development of domestic
capital via its corrupting influence on local elites.

Take the example of Uganda: Most major investments are by
multinational capital. This multinational capital influences public
policy through global institutions such as World Bank and IMF. These
institutions discourage governments from aggressively developing certain
sectors of the economy that may foster transformative change, saying
everything should be left to the market. But this recommendation favours
sustaining economic structures (like production and export of raw
materials) that relegate our nations to an inferior position in
international trade.